By - Jim Vess

Puget Sound Energy to sell Montana coal-fired plant share to NorthWestern Energy for $1

Energize Weekly, December 18, 2019

NorthWestern Energy is set to file an application with the Montana Public Service Commission to purchase Puget Sound Energy’s share of the Colstrip power plant for $1.

The deal helps Bellevue, Washington-based Puget Sound Energy meet a Washington state law requiring utilities to stop using coal-fired power by 2025, and it provides Sioux Fall, S.D.-based NorthWestern Energy with needed capacity for its Montana customers.

Under the agreement, NorthWestern Energy will take over Puget Sound Energy’s 25 percent share in Colstrip’s Unit 4, equal to185 megawatts (MW) of capacity, for $1, and pay up to $3.75 million for transmission assets. The purchase would raise NorthWestern Energy’s share in the Colstrip units to 55 percent.

NorthWestern Energy would then sell back to Puget Sound 90 MW of generation in a five-year purchase power agreement.

The fixed operations and maintenance costs and property taxes for the additional 25 percent share of Colstrip Unit 4 were estimated by NorthWestern Energy at about $15 million, with 50 percent offset by the Puget Sound power purchase agreement and other 50 percent from the reduction in purchases from the market, NorthWestern Energy said.

“Even with projected operating and maintenance costs factored in, purchasing more of Colstrip Unit 4 for only $1 is by far the most affordable way to help close the gap in the capacity shortage facing our customers,” John Hines, NorthWestern Energy vice president of supply, said in a statement.

The fate of the Colstrip plant has been a running issue in Montana where lawmakers last legislative session tried and failed to craft a bailout for the plant, which involved NorthWestern Energy.

Two of Colstrip’s four units are going to be closed as part of a settlement in a clean air lawsuit. Six companies own shares in the plant’s two newer units. Four of the companies are looking to cease operations as early as 2025.

Spokane-based Avista Corporation, which owns 15 percent of units 2 and 3, must also comply with the Washington state law banning coal-fired generation after 2025.

Colstrip is a town of about 2,000 in the southeast corner of the state where the power plant employs 320 people.

The purchase will meet about 25 percent of Montana’s electricity demand. Jones said that if the 95 MW of generation had been available last winter during a four-day cold snap, when NorthWestern had to buy power on the open market, it could have saved customers $4 million.

NorthWestern is setting aside $5 million from the sale of power to Puget Sound Energy for environmental remediation and decommission costs. Puget Sound Energy will still be responsible for its share of decommissioning costs.

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